Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/277370 
Year of Publication: 
2016
Citation: 
[Journal:] European Journal of Economics and Economic Policies: Intervention (EJEEP) [ISSN:] 2052-7772 [Volume:] 13 [Issue:] 3 [Year:] 2016 [Pages:] 339-353
Publisher: 
Edward Elgar Publishing, Cheltenham
Abstract: 
Retained profits of firms exceed investment in the Netherlands. The resulting net savings are mainly invested in foreign assets, which is consistent with the surplus on the current account of the balance of payments. Both have increased to almost 10 per cent of GDP in recent years. We present a stock-flow consistent model to explain firms' excess savings, inspired by Hein (2012), in an open economy context. This enables us to model the preference of firms to invest in financial assets abroad and to analyse the observed close link between firms' excess savings and the current-account surplus. As a consequence, we also explain the close relationship between net household savings and government budget deficit. We present simulation results to illustrate the workings of our model.
Subjects: 
stock-flow consistent modelling
retained profits
current-account surplus
JEL: 
E44
E6
F45
G32
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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